The stock market broadly refers to the collection of exchanges and other venues where the buying, selling, and issuance of shares of publicly held companies take place. Such financial activities are conducted through institutionalized formal exchanges (whether physical or electronic) or via over-the-counter (OTC) marketplaces that operate under a defined set of regulations.
While both the terms “stock market” and “stock exchange” are often used interchangeably, the latter term generally comprises a subset of the former. If one trades in the stock market, it means that they buy or sell shares on one (or more) of the stock exchange(s) that are part of the overall stock market.
A given country or region may have one or more exchanges comprising their stock market. The leading U.S. stock exchanges include the New York Stock Exchange (NYSE) and the Nasdaq. These leading national exchanges, along with several other exchanges operating in the country, form the stock market of the United States.
KEY TAKEAWAYS
- Stock markets are venues where buyers and sellers meet to exchange equity shares of public corporations.
- Stock markets are vital components of a free-market economy because they enable democratized access to trading and exchange of capital for investors of all kinds.
- They perform several functions in markets, including efficient price discovery and efficient dealing.
- In the United States, the stock market is regulated by the Securities and Exchange Commission (SEC) and local regulatory bodies.